Assessing the value of strategic information technology investments

Abstract

Today, information technology (IT) is extremely important to the smooth operation of many organizations. Firms in many industries would be seriously affected if their IT-based systems failed even for short periods. In addition to being important to operations, IT-based systems are just as important in the control and planning functions (Bruns and McFarlan, 1987). There now is a growing awareness that IT investments can be of strategic importance to a firm, that is, IT investments can improve a firm’s competitive position or allow the firm to become more vulnerable to competitive forces (Parsons, 1983; Benjamin et al., 1984; Cash and Konsynski, 1985; Clemons and Row, 1988). The list of publicized cases where IT investments have enabled firms to gain a competitive advantage includes investments by such firms as American Airlines, American Hospital Supply Corporation, Avis, Bank America, Citicorp, Digital Equipment Corporation, and General Electric (Cash and Konsynski, 1985; Ives and Learmonth, 1984; Porter and Millar, 1985; Strassmann, 1988; Wiseman, 1985).

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